Consumer Sentiment rebounded in April after suffering its second worst 11-month skid in history. The rebound was driven by “a sharp drop in gas price expectations” which had a big positive impact on consumers’ personal finance outlook. Even so, inflation expectations for the next 12 months remained at a 41-year high of 5.4% (see bottom graph below). This demonstrates that inflationary psychology is starting to become ingrained in the minds of consumers, which could make inflation stickier than the Federal Reserve expects as it attempts to rein in core Personal Consumption Expenditures (PCE) from 5.2% down to its target rate of 2.0%.
